The Hope/American Opportunity Tax Credit
Receive a tax credit for your college education expenses.
In 2009, the Hope Credit was expanded into the American Opportunity Credit. This new tax credit offers families more options in receiving a dollar-for-dollar credit for qualified education costs. The intended goal of this college financial aid was to cover the majority of college money at 4-year colleges or universities, and the whole cost of attending community colleges.
Tuition tax credits are part of the federal aid provided for students pursuing their bachelors degree. Taking advantage of federal college financial aid allows you to spend less money on college loans and other money for college that must be repaid.
The more you know about how to file your tax returns for the years when you’re pursuing your college education, the better off you’ll be. The American Opportunity Credit is just one of many ways the federal government, states and colleges and universities help students pay for college.
What Is the Hope/American Opportunity Credit?
A tax credit like the Hope/American Opportunity Credit reduces your tax liability one dollar for each dollar you spend on qualifying costs toward a college program. In most cases, taking advantage of a tax credit like this one will provide you with larger benefits than you would get with a tax deduction.
You must be enrolled in a college or university at least half-time to qualify for this credit, and the maximum amount of money for college you can take in a year is $2,500. However, an unlimited amount of family members can receive up to the maximum amount each year; a family is not limited to the $2,500 maximum if there are more than one eligible college students in the family.
There are income restrictions on who can receive this tax credit. You must have a modified adjusted gross income of $80,000 or less to be eligible for the full amount of college money offered by this tax credit; for joint filers, the total income must be $160,000 or less. At higher incomes, the credit begins to phase out; and if you earn more than $90,000 ($180,000 for joint filers), you are not eligible for this credit.
What Are the Benefits of the Hope/American Opportunity Credit?
While the Hope Credit was only applicable during the first two years of a college education, with the American Opportunity Credit, you can pay for college for the first four years of that education.
This tax credit can be used for education costs including tuition and required textbooks, other reading material, supplies and equipment for your college program.
Hope/American Opportunity Tax Credit Tips & Tactics
- Are you listed as a dependent on your parents’ tax return? If so, they can claim this tax credit. If not, you can claim the credit on your own tax returns.
- If you qualify as lower-income and have little or no tax liability, you could be reimbursed up to $1,000 if you claim this credit.
- The American Opportunity Credit is specifically for education costs paid in 2009 and 2010. After 2010, you should pursue the Lifetime Learning Credit, a similar college tax credit with slightly different terms.
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